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5 Bank Stocks Ready to Rise With the Housing Recovery: UBS

3. City National Corp.

Share of
City National Corp.(CYN - Get Report) of Los Angeles closed at $49.11 Tuesday, returning 13% year-to-date, following a 27% decline during 2011.

The shares trade for 1.6 times tangible book value, and for 12.5 times the consensus 2013 EPS estimate of $3.94. The consensus 2014 EPS estimate is $4.09. Based on a quarterly dividend of 25 cents, the shares have a yield of 2.04%.

City National on Nov. 15 that it would move up the payment of its fourth-quarter dividend to Dec. 18, while also paying a special dividend of 25 cents a share on the same date, avoiding the possible increase of the 15% federal income tax rate cap on qualified dividends that will occur in 2013, unless President Obama and Congress extend the lower rate as part of a deal to resolve the Fiscal Cliff. Otherwise, the dividends will be treated as ordinary income next year.

The company ranked seventh in the UBS ranking of home price changes, weighted by deposit share in City National's market footprint, with year-over-year growth rate of 4.20%, although the company was in second place with an annualized price increase rate of 0.97% in September.

City National has shown strong earnings improvement over the past year. The company's third-quarter net revenue, excluding provisions for loan losses, increased to 52% year-over-year, to $108.5 million. Noninterest income -- excluding investment gains -- was up 61% year-over-year to $106.4 million, as the company booked $1.7 million in revenue from FDIC loss-sharing agreements, compared to $14.2 million in expenses from the agreements a year earlier.

Trust and investment fees rose to $43.5 million in the third quarter from $35.4 million in the third quarter of 2011, while brokerage and mutual fund fees increased to $9.1 million from $5.1 million, reflecting the acquisition Rochdale Investment Management in July.

Scinicariello rates City National a "Buy," with a $60 price target saying on Nov. 15 after the dividend announcement that "Including the special dividend and the accelerated 4Q12 dividend payment, the dividend payout ratio totals ~37% for 2012 which is a testament to the company's solid capital position. On an ongoing basis, we estimate that the dividend payout ratio will run at a ~25% level with plenty of support for further increases."

The analyst added that with a strong Sept. 30 Tier 1 common equity ratio of 9.1%, "we expect continued opportunistic capital deployment with a focus on organic growth, dividends, and accretive acquisitions across business lines."

Scinicariello estimates that City National will earn 75 cents a share in 2013, followed by EPS of $1.08 in 2014.

Interested in more on City National Corp.? See TheStreet Ratings' report card for this stock.